In 2017, Amazon.com made a number of acquisitions to help achieve its ambitions.

Question

In 2017, Amazon.com made a number of acquisitions to help achieve its ambitions. Among the firms acquired by Amazon.com are the following:

Whole Foods

Zappos

Kiva Systems

Elemental Technologies

Lovefilm

Souq.com

Quidsi

Audible

Annapurna Labs

Twitch

You are required to research on these firms and report on the following:

(15 points) Conduct a Five Forces Framework analysis for Amazon.com (customers, current competitors, potential entrants, substitute products, and suppliers)

(5 points) What is the objective of Amazon.com?

(20 points) Describe the background of each firm acquired.

(15 points) For each firm, explain what strategy does Amazon.com intend to accomplish.

(15 points) Discuss how each firm can help Amazon.com achieve its objective.

(10 points) What was the price of each acquisition? Do you believe that Amazon.com had overpaid the firms acquired?

(5 points) What is the type of diversification does each acquisition involve?

(5 points) Do you believe that these acquisitions will help Amazon.com achieve its goal?

(5 points) What further acquisitions do you suggest that Amazon.com should undertake to achieve its objectives?

(5 points) What other restructuring activities do you suggest that Amazon.com should undertake to achieve its objectives?

Explanation / Answer

ans.
Michael Porter developed the Five Forces Analysis model as a tool for the external analysis of firms. In the case of Amazon, the external factors define the conditions of the e-commerce industry environment, with focus on the online retail market. To keep this position in the long term, Amazon must regularly evaluate the external factors in the online retail industry environment, through the use of tools like the Five Forces Analysis model.
The global scope of the e-commerce business also exposes Amazon to a diverse set of external forces. Thus, the company must ensure that it remains resilient amid changes in the conditions of the online retail industry environment. The following are the intensities of the external factors affecting Amazon, based on Porter’s Five Forces Analysis model:
Competition (Strong Force):
Amazon competes against strong competitors. This aspect of Porter’s Five Forces Analysis model tackles the effects of firms on each other. In the case of Amazon.com Inc., the following external factors are responsible for the strong intensity of competition or competitive rivalry in the online retail industry environment:
High aggressiveness of firms (strong force)
High availability of substitutes (strong force)
Low switching costs (strong force)
Bargaining power of buyers or customers (Strong force):
Amazon’s vsion statement and mission statement highlight the company’s customer-centric approach to e-commerce business. This aspect of Porter’s Five Forces Analysis model determines the influence of consumers on firms and the industry environment. The following external factors support the strong intensity of the bargaining power of customers in affecting Amazon:
High quality of information (strong force)
Low switching costs (strong force)
High availability of substitutes (strong force)
Bargaining power of suppliers (Moderate Force):
Suppliers control the availability of supplies or materials Amazon.com Inc. needs for its e-commerce operations. The influence of suppliers on the online retail industry environment is outlined in this aspect of Porter’s Five Forces Analysis model. Amazon experiences the moderate intensity of the bargaining power of suppliers based on the following external factors:
Small population of suppliers (strong force)
Moderate forward integration (moderate force)
Moderate size of suppliers (moderate force)
Threat of substitutes or substitution (Strong force):
Amazon.com Inc. competes with substitutes in the online retail market. This aspect of Porter’s Five Forces Analysis model identifies how substitutes affect the industry environment. In the case of Amazon, the following external factors support the strong intensity of the threat of substitution:
Low switching costs (strong force)
High availability of substitutes (strong force)
Low cost of substitutes (strong force)
Threat of new entrants or new entry (Weak force):
New firms potentially reduce Amazon’s market share in online retail. The effects of new entrants are considered in this aspect of Porter’s Five Forces Analysis model. Amazon.com Inc. experiences the weak intensity of the threat of new entry based on the following external factors:
Low switching costs (strong force)
High cost of brand development (weak force)
High economies of scale (weak force)
(5 points) What is the objective of Amazon.com?
ANS:
The objective of Amazon.com is “To be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
(20 points) Describe the background of each firm acquired.
ANS:
Whole Foods Market Inc.: Whole Foods market Inc is an American supermarket chain that specializes in selling organic foods products without artificial additive products for growing foods, colours, flavours, sweeteners and hydrogenated fats. It has 473 stores in north America and the United Kingdom.
Zappos: Zappos.com is an online shoe and clothing s

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